USD/JPY Hits 115 on Fed Rate Bets

The dollar rose to a seven-year high against the yen as signs of strength in the U.S. economy backed speculation that the Federal Reserve will increase interest rates next year.

The Bloomberg Dollar Spot Index headed for its highest close since April 2009 after data showed employers added more jobs than economists forecast. The Labor Department reports payrolls tomorrow. Australia’s dollar fell to a four-year low after the price of iron ore, a key export, declined to its cheapest level in more than five years and the unemployment rate held at an almost 12-year high. The euro held a loss from yesterday before the European Central Bank sets policy today.

“The dollar continues to be solid,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “Economic data out of the U.S. have been relatively strong lately. We expect the Fed to raise rates in June and U.S. yields, which are pricing in a hike around the third quarter, to play catchup, pushing dollar-yen higher.”

Bloomberg

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